Hello there It is common in the literature on optimal policy to use conditional welfare starting from the deterministic steady state, the reason being to take into account the transition from the deterministic to the stochastic steady state, quoting Schmitt-Grohe and Uribe (2004): “Because differen…

About the concept of Stochastic steady state

jpfeifer July 13, 2022, 9:02pm 2

Don’t hang yourself up on this term. What they are referring to is the difference between conditional and unconditional welfare as the latter does not take into account transitional behavior. See the thread at

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